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FileAbhi Services on Filing:  Income Tax Return for Businesses

Introduction

Every individual, partnership firm, or company running a business is required to file an income-tax return. The Income Tax Act, 1961 (or ‘the Act’) has defined the meaning of ‘person’. It further has specific definitions for firm, company, etc. It is important to understand the applicability of different ITR forms to different persons. Generally, the following persons are required to file business income tax return forms:

• Self-employed individual or sole-proprietorship
• Partnership firm
• Limited Liability Partnership firm
• A private or public limited company
• One person company
• Non-profit organisation

Applicability of different ITR Forms

1. Self-employed individual or sole proprietor

There is a fine line of difference between self-employed individual and sole proprietor. A sole proprietor is a self-employed individual. However, the reverse may not always be true. A sole-proprietor is the one running a business. But a self-employed individual may be working for someone on a contractual basis as freelancers and not always running a business. 

ITR 3 and ITR 4 are the applicable income tax return forms for individuals running a business. ITR 3 is a specific form for individuals and HUFs earning income from business or profession. An individual/HUF should file ITR 3 if total income includes income from business/profession and ITR1, ITR 2 and ITR 4 are not applicable.  

ITR 4 is a special type of form applicable in specific cases. You can refer to our detailed article on ITR 4. ITR-4 applies to individuals/HUFs and firms (other than LLP) having income up to Rs. 50 lakhs. These persons must have opted for presumptive taxation under sections 44AD, 44ADA, and 44AE of the Act. In the case of ITR 4, tax audit is required if the taxpayer declares income less than the prescribed deemed income. 

Eg. As per section 44AD of the Act, 8% of total turnover or gross receipts can be declared as income if the turnover or gross receipts are up to Rs. 2 crores. The taxpayer can declare an amount higher than 8% as income. But a lower income can be declared only after auditing the accounts.  

More details on applicable forms, deductions available,etc for ITR 3 and IT4 are given on this link. 

2. Partnership Firms / Limited liability partnership firm

ITR 4 and ITR 5 are the applicable income tax return forms for a partnership firm running a business. 

As explained above, ITR 4 will only be applicable if the partnership firm opts to declare income sections 44AD, 44ADA, and 44AE of the Act. 

A Limited liability partnership firm has to file its return in ITR 5 only. It does not have an option to opt for ITR 4.

Separately any firm claiming exemption under section 11 of the Act is required to file ITR 7 (refer TO discussion below)

3. Private limited company / One person company

ITR 6 applies to a company. The Act defines ‘company’ as 

• An Indian company (further defined in the Act);
• Body corporates incorporated under the laws of any country outside India; or 
• Any institution, association, or body, whether Indian or not which is declared to be Company by general or special order of the Board.

Hence a private limited company and one person company are ‘company’ under the Act. Hence ITR 6 is applicable to both these companies. 

In case of company claiming exemption under section 11 of the Act (Income from property held for charitable or religious purposes), ITR 7 is applicable.

4. Trusts / NGOs / Section 8 company

All charitable organizations or institutions are required to file income tax returns if their income exceeds the minimum prescribed limit. The applicable income tax return form is ITR 7. ITR 7 can be filed by persons mentioned in sections 139(4A), 139(4B), 139(4C), and 139(4D) of the Act. The status of the person could be a firm, a company, local authorities, the Association of Persons, or Artificial Juridical Persons. 

Tax Audit

Every person carrying on business/profession may be required to undertake a tax audit depending on turnover or gross receipts. The limits are as under:

In case of multiple business, the limit of Rs. 1 Crore/ Rs. 10 crores are applied to aggregate of turnover from all business. Similar is the case for multiple professions. 

However, if you have a business and profession, the above limits will be separately applied. 

FAQ Section

1. What ITR Forms are for businesses?
   • ITR Forms applicable for businesses include ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7
2. What is the due date for ITR filing for businesses?
   • The due date of filing an income tax return for a business is 31st July of the assessment year if audit provisions are not applicable. If the business is subject to audit, the due date is 31st October of the assessment year. If the business is subject to transfer pricing provisions, the due date is 30th November of the assessment year.
3. Do different types of companies have different ITR filing dates?
   • Yes. The due date of filing income tax return depends on 2 major factors – whether audit is applicable and whether transfer pricing provisions are applicable.
4. What if a business does not file ITR before the due dates?
   • A business can file a belated income tax return if it fails to file it within the due date. This can be done with payment of additional fees and interest on tax, if any.